To start the year, no resolutions, but resolutions! That subscription to loan insurance is a prerequisite for getting a mortgage loan. These limited expenses represent, on average one third of the total cost of the loana significant weight that can be reduced by doing competition. We explain how you can get the cheapest loan insurance for your property project in 2023.
Expenses for borrower’s insurance
L’loan insurance is a double protection for the borrower and for the bank providing the financing. It intervenes in case of failure of the first, victim of one danger to life (death, disability, incapacity, even loss of employment). No bank agrees to lend often large sums over a long period of time without this guarantee, which burdens the total costs of the mortgage loan.
that costs of mortgage insurance depends on various parameters, completely independent of the borrower’s solvency, which is then examined for credit:
- Borrower’s age
- His health
- His work
- Their behavioral habits (smoker or non-smoker, practice of a risky sport).
In addition, they loan functions : amount, type (main or secondary residence, hire purchase) and duration. The total cost of the insurance is calculated as a percentage of the borrowed amount, expressed by a insurance rate.
The older you are, the more expensive the insurance is due to risk of death and disability which is increasing. That high risk jobs as firemanpoliceman, soldier, are also punished, as are the people who regularly practice one sport is considered dangerous (mountain climbing, horse riding, sailing, etc.).
But the most influential factor on the cost of insurance ishealth. Sick or previously sick people are affected additional premiums or exclusion of warrantyor even get one denial of insurance if the risk of loss is deemed to be too high. However, they can be trusted Convention of Aera (Insure and loan with a worsening health risk) to access insurance and credit on standard terms and conditions or with one limited prize.
Guarantees death and PTIA (Total and irreversible loss of autonomy) are mandatory and generally supplemented by incapacity and invalidity guarantees, which come into force in the event of illness (ITT warranty). Job loss cover is less often taken out because the cost/protection benefit is not fixed.
The free choice of loan insurance
Mandatory product to borrow, themortgage insurance fortunately it can be freely chosen. The law prohibits tied sales of credit and insurance since the Murcef Law of 2001, but it is Lagarde’s law of 2010, which will establish the principle of free choice of borrower insurance, by allowing the insured to reject the contract offered by his bank.
What interest? Pay less! On average, the offers from alternative insurance companies between two and three times cheaper than bank contracts known as group contracts because they are pooled over a community of borrowers. The fact of being custom-made cutlerywith guarantees perfectly adapted to its situation, is one of them benefits of delegation of borrower insurance.
Borrower insurance: what changed in 2022
The regulation of mortgage insurance has undergone many changes since the Lagarde Act. Effectively exercising one’s right to free contractual choice when applying for a loan has proven to be a challenge for a majority of borrowers, the legislature has added two other mechanisms to change formula during the loan :
- that Hamon law March 2014, which approved the contract change for the first twelve months,
- that Bourquin’s law January 2018, which unsuccessfully attempted to facilitate substitution of maturity date insurance beyond the first year of the loan.
Despite this strengthening of borrowers’ rights, bancassurance companies still hold 87% of the annual quotaa quasi-monopoly which Parliament will seek to break by further opening the market to competition thanks to Lemoine’s law.
Entry into force on 1eh June 2022, the Lemoine’s law is revolutionary for borrowers because it allows them to change mortgage insurance at any time, with no minimum commitment and without having to meet any deadline. The Hamon and Bourquin laws disappear to make room for this simple layout, simpler and more transparent.
The Lemoine Act contains two other key measures:
- that strengthens the right to be forgotten : people cured of cancer can access insurance without having to indicate their previous illness in the health questionnaire, after 5 years instead of 10 after the end of the protocol. Right now it concerns former hepatitis C patients.
- That deletion of the health questionnaire under certain conditions: the insurance company cannot seek information regarding the borrower’s health for a mortgage of less than €200,000 repaid before 60 years.
Compare to pay less for your loan insurance
Now that you have a better understanding of the legal framework for borrowers’ insurance, you can make an informed choice about the contract that matches your profile. Like any insurance product, home loan insurance must be compared because rates vary from one service provider to another with similar guarantees.
The use compare borrower insurance to put the best offers in competition and select the most competitive, while respecting the bank’s security requirements. This tool is fast, free and no-obligation, and allows you to grab in a few clicks more offers from the best alternative contracts off the market. Don’t hesitate to ask for help from one borrower insurance broker : again, the service is free and facilitates the choice of the appropriate formula thanks to informed advice.
At the Magnolia.fr broker, the average insurance rate is 0.11% for a borrower between the ages of 25 and 35 who takes out a mortgage of €200,000 over 20 years. A person aged between 35 and 45 borrowing €400,000 over 20 years benefits from the average insurance rate of 0.13%. The banks apply to the same profiles minimum insurance rate of 0.36%.
Check out our latest real estate purchasing power barometer to visualize all the interest of playing insurance delegation. Free choice of borrower insurance in the first intention or during the loan makes it possible to achievesignificant savings. The average profit amounts to several thousand euros.
While many wonder if we can borrow in 2023considering constant interest rate increase coming up againstimmobility of wearthe delegation, i lower the cost of insuranceis and will be the only saving lever for lower APR (Global Effective Annual Rate), which must absolutely remain below the legal threshold, allowing you to get the grail in 2023.